Hi Guys,
Thanks for this very vigorous MFO discussion exchange. The divergent perspectives are well reasoned and themselves sometimes complex. But I do not find the issue to be especially difficult. While I can not control investment outcomes, I have absolute control of my personal investment process. And process matters most.
Individual investors always have the option to make investing as complex or as simple as they choose. Choosing the complex route requires a commitment to study, to constant research, and most importantly to time demands. I sincerely hope there is a measurable payoff to this arduous and uncertain selection.
I emphasize uncertain because the accumulated data suggests that the odds of a positive Alpha (excess returns) are small, and diminish over time, even for a Herculean effort.
Although individual investors may indeed be smart and talented folks, it is highly likely that professional Mutual Fund and Hedge Fund mangers are still more smart and more talented. They certainly enjoy the advantages of their full time commitment that is supported by a well trained professional research staff.
Yet this exceptional group has deep rooted difficulties in outdistancing their benchmarks. Please see Barry Ritholz’s “The Most Fascinating Investing Paradox” article posted on MFO earlier. Here is the Link to revisit that article;
http://www.bloombergview.com/articles/2015-02-12/hedge-funds-underperform-as-investors-give-them-more-moneyI recommend that you consider visiting a Vanguard Group 2010 study that was referenced in the article and provided data for Ritholz’s interpretation. It’s consistently a good policy to examine original sources. Here is a direct Link to the Vanguard work:
https://pressroom.vanguard.com/content/nonindexed/Do_hedge_funds_hedge_the_experience_of_the_great_recession.pdfThe Hedge Funds are prime illustrations of just how difficult it is to outscore the marketplace. These Hedge Funds are superb examples of complex investment strategy users. Their payoffs are dubious at best. Can individual investors do better? A few will, but the vast majority will not, regardless of dedicated effort. The market interactions are overwhelmingly complex.
So why not default to the simplest options? One or two Balanced mutual funds (like from Vanguard and/or from Dodge and Cox) might be a wise choice. If further diversification is deemed necessary, the Paul Farrell’s Lazy-man portfolios are convenient low cost options. Here is another repeat Link to his table of lazy-man portfolios generated by stellar investment wizards:
http://www.marketwatch.com/lazyportfolioAs always, the decision rests with the preferences of the individual investor. In a way, that’s too bad given his dismal track record.
According to CXO Advisory Group, Jim Cramer had an accuracy score that hovered just below
50% for the entire time of that extended study. Dice be a lady tonight.
Best Wishes.
Has Gold Been A Good Investment Over The Long Term? hank, maybe this will assist you. From Siegel's book, latest edition. Looks like a read of Chapter 5 might clarify things for you even more. Hope this helps.
"Asset Returns Since 1802
Figure 1-1 is the most important chart in this book. It traces year by year how real (after-inflation) wealth has accumulated for a hypothetical investor who put a dollar in (1) stocks, (2) long-term government bonds, (3) U.S. Treasury bills, (4) gold, and (5) U.S. currency over the last two centuries. These returns are called total real returns and include income distributed from the investment (if any) plus capital gains or losses, all measured in constant purchasing power."
...................."The real return on fixed-income investments has averaged far less; on long-term government bonds the average real return has been 3.6 percent per year and on short-term bonds only 2.7 percent per year."
hank, note that the 3.6% and 2.7% correspond to the bonds and bills in his chart.
"The average real return on gold has been only 0.7 percent per year. In the long run, gold prices have remained just ahead of the inflation rate, but little more. The dollar has lost, on average, 1.4 percent per year of purchasing power since 1802, but it has depreciated at a significantly faster rate since World War II. In Chapter 5 we examine the details of these return series and see how they are constructed."
hank, regarding your comment: "Regarding investing in T-Bills, it's hard for me to understand how they would have approached gold's return through appreciation during the post-2000 time-frame"
I agree with you. From 2001 to 2011 gold had superb performance, and I'm sure Treasury bills did not even come remotely close. Siegel's data is the really long term......from 1802 thru 2012. He never suggested that there were not time periods of 10, 15, 20, 25 years, etc, where the results were not significantly different.
Take gold for example: it lost 90% of its purchasing power, that is to say, real return, from 1980 until it bottomed, somewhere around 2001. Even on a nominal basis it lost 70% (not taking inflation into account). Then from 2001 till 2011 it was probably the very best performing asset class, far better than stocks, bonds, "bills" [Treasury bills], etc.
Happy Investing
Jim Cramer: Mutual Fund Investors Are Hosed Note: The above data was taken from Jim Cramer's own website!
Just buying an S&P 500 index fund, you would have performed 36% better than enacting every single buy and sell of the Action Alerts PLUS portfolio, which is a paid service so you can constantly check your emails and make all the buys and sells.........so you can drastically underperform the market, and pay much higher taxes from all your buying and selling, versus say the Vanguard S&P 500 Index fund where you will only pay taxes on qualified dividends, as there has not been a capital gains distribution in more than 10 years.
Jim Cramer: Mutual Fund Investors Are Hosed 
The Closing Bell: S&P 500 Rises 0.4% to All Time High of 2,093.97: Russell 2000 Record
Jim Cramer: Mutual Fund Investors Are Hosed @Scott: Good perspective.
There's no silver bullet to investing. To an extent, we are blinded by the times in which we invest. I'll listen to just about anyone. Doesn't mean I have to follow their advice.
In terms of making sense of investing ... Pick up 2 or 3% here; 10% there; and another 2
5% somewhere else. Isn't that really how we learn?
I find Cramer a likable sort, although full of bluster. Perhaps he's misplaced in the role of financial commentator. Can you imagine him in the role of TV Weatherman? :)
FAIRX....maybe we should ignore the crowd Looks like its having a good day today:
AIG +2.73
SHLD +5.27
JOE +1.47
FNMA +7.52
Has Gold Been A Good Investment Over The Long Term? No desire to become an apologist for gold - or any other investment. I've already stated that equities and corporate bonds are better alternatives over very long time frames. I do believe, however, that all investments have their "season". And to argue that gold is never useful to some in hedging portfolio risk is akin to arguing that short-selling of equities or holding cash (even at near 0 rates) can never be useful. The latter two are recognized ways for some to hedge the aggressive sides of a balanced portfolio. To that extent, gold may play a role.
More clarity as to the nature of "Bills" on Siegel's chart would be appreciated. It's likely a reference to T-Bills. My understanding is that these come in varying maturities. The 91-day T-Bill rate is often quoted, but 1-year T-Bills are available. I wouldn't (purposely) post data with as ambiguous a nomenclature as Siegel's reference to "Bills".
Regarding investing in T-Bills, it's hard for me to understand how they would have approached gold's return through appreciation during the post-2000 time-frame. Let's take a look. In 2000 gold was selling for $280 per Troy Ounce. This morning it's quoted at $1230. That works out to a compounded annual return of better than 10% over that 1
5-year span. I don't know what the 1-year T-Bill has returned over 1
5 years, but it's probably considerably less.
Gold Price Chart:
http://www.nma.org/pdf/gold/his_gold_prices.pdf
In the Future, Portfolio Management Will Be Free $198.00 yr. on Morningstar, will give you a portfolio analysis (xray) in seconds, every day of the year.....that's 50 cents a day...almost free to know where your at, for Self management vs the market as a whole...if that's what you wish...today
Jim Cramer: Mutual Fund Investors Are Hosed FYI: Mad Money host Jim Cramer, best known for offering stock tips on cable TV, is quickly becoming famous for taking what would seem for him a contrarian viewpoint — that investors should avoid stock-picking mutual funds like the plague.
Actively-managed funds are in one business and one business only, Cramer argues. They must grow their client base to maximize their own fee income, regardless of performance
Regards,
Ted
http://www.marketwatch.com/story/mutual-fund-investors-are-hosed-jim-cramer-2015-02-12/print
In the Future, Portfolio Management Will Be Free
Healthcare ETFs Have More Room To Run I own both PJP and PHSZX. PJP beats PHSZX since PJP inception in mid 2005, with much smaller volatility, and it is more tax efficient as well.
S&P 500 Approaching New Highs FYI: After another rally today, the S&P
500 is now just
5 points below its prior all-time highs reached at the end of December. As shown below, the index and six of ten sectors are now in overbought territory, with Consumer Discretionary leading the way higher. The one sector that has not participated in the fun recently is Utilities. In fact, the sector is now trading in oversold territory as the rest of the market rallies.
Regards,
Ted
http://www.bespokeinvest.com/thinkbig/2015/2/12/sp-500-approaching-new-highs.html?printerFriendly=true
Rainier International Discovery @linter: LLJB was discussing KGGIX, which is a "diversified" global all-cap fund which is really liking materials and Russia, whereas GLFOX is a non-diversified infrastructure fund with 39% in utilities and 43% in industrials. So I wasn't sure if infrastructure was of interest. Also, infrastructure funds, because of their exposure to utilities may not fare well in a rising interest rate environment, and hot money may migrate to other sectors. Surprisingly, GLFOX did well in the latest interest rate spike 4/21/2013 - 9/1/2013, when the 10 YR increased from 1.66 to 2.94%, whereas its competitors were no so fortunate as shown
HERE.
@LLJB: Both funds are outstanding, but recent performance has been better for GLFOX which hedges its currency exposure. I suspect that GLFOX had some sort of hedge in place during the interest rate spike in 2013 as its performance was very different from its competitors.
Here is a nice white paper on infrastructure investing:
https://www.credit-suisse.com/pwp/am/downloads/marketing/infrastructure_ch_uk_lux_ita_scandinavia.pdfKevin
Has Gold Been A Good Investment Over The Long Term? 
Has Gold Been A Good Investment Over The Long Term? Total real return on stocks, bonds, bills, gold, US dollar, 1802-2012.
From Jeremy Siegel, Stocks for the Long Run, latest edition
Art Cashin: "Interest rates Are Behaving" Why Ted, Why?
Why not? Or why get so upset? LOL, it's someone who's been on the floor for 1
50 years, I think he may know a couple of things he picked up during the eons he's spent at the NYSE. The only issue is that CNBC doesn't actually let him talk beyond "sound bites". Not his fault.
Welcome to the modern day of sound bites and "tweets". Einstein could live today and if he tried to explain tremendous theories to the masses via social media, his PR person would go, "no no, Albert, you have to keep your genius under 140 characters." He'd ask why and then be informed that the modern day population has an attention span of under 140 seconds.
When Cashin has occasionally interviewed elsewhere (King World News a couple of times, at least), he's been highly informative. CNBC is, well, CNBC.
Has Gold Been A Good Investment Over The Long Term? @Junkster - I hope we're both around in 20 years to compare the results. Pick your equities. You must be specific. For example, you can't say the S&P
500 because that changes over time. Unless the paper bill deteriorates both it and the gold bar will be the same as the day they went in the can. We will not be doing any adjustments inflationary or otherwise. $100 today in each of these items will be worth what in 20 years? Could be fun.
Lastly, do remember, I said that I view gold strictly as a collectible however right or wrong that view may be.
And maybe an incentive to live another 20 years. I am the least qualified person to select individual equities for the long run. So why not use VTSMX which pretty much covers the full spectrum of the stock market. Not only has that beaten gold the past 20 years but so has the mundane Merrill Lynch High Yield Master II Index (junk bonds) beaten gold. With stocks near all time highs and gold way off, you may begin with a bit of an advantage. So let's see.
I hate gold with a passion (silver even more) I will always remember gold above 800 in late 79 early 80 and silver at $
50 an ounce in April 1980 and think they are both terrible investments, collectibles or whatever. So let's throw in that other dog silver in the 20 year contest with gold and VTSMX. Maybe I will have to eat my words in 20 years assuming I can even still eat by that age and don't have to be spoon fed. I will use tonight's closing prices as my basis
